Business

Russia reduces grain harvest forecast

Russian Prime Minister Vladimir Putin has warned this year's grain harvest - hit by fire and drought - will be worse than previously forecast.

The harvest is now expected to be 65 million tonnes, but could be as low as 60 million tonnes, Mr Putin said.

The previous forecast had been between 70 and 75 million tonnes.

Mr Putin also said that the ban on grain exports could be extended beyond the end of 2010 because of shortages for domestic markets.

The latest Russian announcements appear to have put further upward pressure on global wheat prices, with Chicago Board of Trade wheat for September delivery up one cent at $7.26 a bushel.

'No crisis'

Wheat prices rose 25% last week to hit two-year highs as drought and fires have devastated crops in parts of Russia, and led to the government banning the export of grain including wheat, barley, rye and maize.

 

Russia is the world's third largest wheat exporter. Its biggest customers include Egypt, Turkey and Syria.

Despite Russia's ban on grain exports, the United Nations Food and Agriculture Organization last week played down fears of a food crisis, saying it was "not justified at this point".

This is because, after record global crops in 2008 and 2009, worldwide wheat stocks have risen substantially in the past couple of years, peaking in June at just under 194 million tonnes, according to US government estimates.

The US - the world's largest wheat exporter - is also predicting that it will have a bumper current crop.

However, shares in global food producers have fallen over the past week, with consumers warned that they likely face higher prices, at least in the short term.

Some commodities analysts say speculators have been driving wheat prices artificially high because they are hoping to make a profit from the worries over Russian exports.

"Fundamentals [of supply and demand] don't necessarily support the strength of the rally to date," said Malcolm Bartholomaeus, a market analyst for Melbourne-based Callum Downs Commodity News.